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Wednesday, 20 July 2011

July 21st 2011: D-Day for the Euro and the Euro-zone? Of will it be just another useless meeting without firm decisions

The debt problems of the PIIGS countries (Portugal, Italy, Ireland, Greece and Spain) during 2010 and 2011, were not only classic examples of the consequences of indebtedness, going beyond ‘a healthy financial situation’, and thus leading to soaring interest rates on the capital markets.

It were also examples that gave full disclosure of the indecisiveness, irresponsibility, growing NIMBY-behavior (Not In My BackYard) and ‘kicking the can down the road’-attitude of the leaders and member states of the Euro-zone.

The European leaders´ failing attempts to solve the Greek debt problem thoroughly in 2010, when it was still a relatively small and contained problem, led to the situation that the debt crisis spread like a forest fire across all the PIIGS-countries. And if nothing happens very soon, the forest fire might even spread across the whole Euro-zone, burning away the euro.

Herman van Rompuy, the intelligent and sincere, but utterly powerless Belgian ´EU-president´ did a brave attempt to organize a meeting of the Euro-zone´s government leaders last Friday, July 15th, but was slam-dunked by German Chancellor Angela Merkel and Dutch Finance Minister Jan-Kees de Jager. 

Their statement: it is useless to organize a meeting, when there is no consensus on a possible solution for the European debt crisis. And that was it!

In my post of last Friday, Europe, the USA and the stupendous game of chicken that is played with the financial markets , I wrote on the postponement of last Friday’s meeting:


The sense of urgency that you would expect at the government leaders of Europe and the US at such moments, is totally invisible. Instead, I sense an attitude that could be described as:

  • “ I’m not giving in to external pressure…;
  •   I’m not giving in to external pressure…;
  •   I’m not giving in to external pressure…;
  •   I’m giving in to external pressure…” 
The most telling example was the farce around the European-summit-that-never-was on securing the Euro. 
Planned by EU President Herman van Rompuy for this Friday July 15th, but scornfully refused by the leaders of Germany and The Netherlands. In the process, it became clear that Herman van Rompuy is nothing more than a marionette, that thought for a brief moment that it had true power.
But times seem to be a-changing: EU president Herman van Rompuy has had his victory after all, although it might be a Pyrrhic victory: The meeting of the European government leaders that he originally wanted to organize last Friday, will now be held on this Thursday, July 21st. And that is about time.

Although a relative rest returned to the financial markets, there is only one spark needed for the smoldering forest fire to light up again. And the omens for tomorrow´s meeting are not very good:

The Dutch newspaper De Volkskrant ( writes two articles on the prologue to the meeting on the Euro-crisis, of which I will show the pertinent snips:

A summit of the EU-leaders this Thursday, will not enable a ´spectacular´ solution in the Greek debt crisis. This is stated by German Chancellor Angela Merkel.

There are a number of necessary steps; there is not one spectacular solution that will take away all problems´, according to Angela Merkel today, during a meeting with Dimitriy Medvedev.
Merkel stated that she understood that people want a quick solution, but emphasized that the Euro-countries should find a long-term solution for the Greek problems.

This is having your hand on the ´chicken-switch´: “The problem of Greece is soooo difficult to solve, that it is not a shame when we won´t find a solution tomorrow”. The financial markets will slash this attitude.

But the reason for this ´smoke curtain´ is, that the German people don´t want to keep paying for Greece and the other PIIGS, while the South-European euro-countries count on the solidarity of the big German partner.

Sarkozy, in his usual gung ho-attitude reacted with the following statement, again according to the Volkskrant:

Sarkozy called German selfishness ´criminal behavior´ (link in Dutch)
To a small circle of insiders, the French president Nicolas Sarkozy critized strongly the German attitude towards the European debt crisis. This was stated by the French magazine ´ Le Canard Enchainé´.
This message was published short before Sarkozy meets German Chancellor Angela Merkel in Berlin today, in preparation of tomorrow´s summit.
According to the magazine, Sarkozy stated before a cabinet meeting that the German attitude concerning European aid to Greece, prolonged the crisis. On top of that, he called the German ´selfishness´ criminal behavior.´The Greek do what they can and achieved already much. The only one´s that lack solidarity are the Germans´.  

Welcome to the EU.


Fortunately, this dispute will undoubtedly blow over in tonight´s meeting. Merkel and Sarkozy will probably find a settlement, although they don´t seem to like each other very much. With this settlement, tomorrows EU-meeting will be a ´success´.

The only thing that I´m afraid of, is that this settlement is a bleeding heart agreement, that tries to keep everybody happy (i.e. the French, Dutch and German electorate AND the PIIGS-countries), except for the financial markets and will therefore be useless after all.

Because then we´re back to square one and the interest rates for PIIGS sovereigns will soar again.

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